SINGAPORE - A range of factors are creating a stop-start market for initial public offerings (IPOs) across the globe in 2016, according to a report by Ernst & Young released on Tuesday (July 5).
After the weakest first quarter since 2009, the IPO market swung back to life in the April-June quarter with a 120 per cent jump in capital raised to US$29.6 billion via 246 deals - up almost a third (29 per cent) on the first three months of the year.
Still, IPO activity at the mid-year point remains significantly below that of the same period last year, EY noted in its quarterly Global IPO Trends report.
At 437 deals, IPO volumes are 38 per cent lower and at US$43 billion, total capital raised is almost two-thirds (61 per cent down on the frst half of 2015.
In the second quarter of 2016, all major global regions saw more capital raised. Asia-Pacific was up 20 per cent, EMEIA (Europe, the Middle East and Africa) was up 187 per cent and the US was up 755 per cent - with the UK and Greater China the only major IPO markets to buck this trend. The most significant gains were made by Australia and New Zealand, which saw proceeds increase by 820 per cent.
However, the drag from an exceptionally slow first quarter meant that for the first six months of 2016, even the buoyant Australian and New Zealand markets were down close to a third on the same period in 2015 in terms of capital raised, with EMEIA down 50 per cent, the Middle East down 55 per cent, Asia-Pacific down 65 per cent and the US down 66 per cent.
Said Jackie Kelley, EY Americas IPO leader: "Despite the substantial uplift in global IPO activity in the second quarter, there are still a large number of IPO-ready companies sheltering from continued volatility and waiting for much needed clarity on the global economic and political landscape. In the meantime, activity is slow but improving."
With 229 IPOs raising US$17 billion in the first half of the year, Asia-Pacific was the most active region by number of deals and second behind EMEIA in terms of capital raised. Although this represents a decrease of 37 per cent and 65 per cent respectively on the same period in 2015, this is broadly in line with the global trend, said EY.
For the quarter, proceeds rose to US$9.3 billion and at 122 IPOs, the number of deals rose by 14 per cent, while capital raised increased by 20 per cent compared with the previous quarter. Investor sentiment appears less cautious than in some other regions and there is a healthy pipeline of companies ready to go public when the timing is right, said EY.
Singapore saw its largest new listing in three years when Frasers Logistics & Industrial Trust raised US$668.7 million in June. Earlier in the quarter, Manulife Reit raised US$469.9 million. Combined, both deals raised US$1.14 billion and were among Asia-Pacific exchanges' top 10 deals for the quarter. Malaysia, Indonesia, Thailand and the Philippines contributed to a total of 10 IPOs, raising US$630 million.
Said Max Loh, EY Asean and Singapore managing partner: "The outlook for the IPO market in Asia-Pacific is brightening following a period of uncertainty. Although a number of political and economic headwinds including Brexit, the slowdown in China's growth rate, fluctuating commodity prices and the possibility of a further interest rate rise in the US continue to weigh on investors, a sense of optimism is returning."
"Barring an uptick in volatility and erosion of confidence, the stage does seem set for an increase in IPOs in the second half of the year."